Though microlending – the idea of providing small loans at low interest rates to individuals in rural areas – gained a favorable response when first created, other common tools in developed countries, like savings accounts and insurance, have not made their way to developing nations.
Fortunately, one microlending company is hoping to change this, according to an article in Business Week. Accion, a non-profit that provides microloans worldwide, has announced that it will be investing $10 million between five startup organizations looking to create more finance opportunities in developing countries. Accion managing director Paul Breloff said that while microlending is a “hugely important part of the puzzle,” there are still many other parts needed to help the global, low-income population prosper. With more help achieving financial stability individuals won’t have to turn to microlending as a form of insurance or to purchase necessities like food or healthcare.
This isn’t the first time Accion has helped other organizations. Previously, it invested in an organization providing healthcare for low-income Mexico residents, and another improving the credit scoring system in Hong Kong.
One of the reasons microfinancing has taken off when other financial tools haven’t is because of the profits gained from these loans, making the service self-sustaining once in place. However, with new technology like credit and risk management tools, financial services that haven’t made their way to more rural or low-income areas of the world can do so for less money than in the past. And now, if these new investments from Accion are any indication of what is yet to come from other organizations in the finance industry, residents of developing countries may soon see their financial options improve.